How to find the funding

Tue 02 Jun 2015

Andhra Pradesh Chief Minister N. Chandrababu Naidu is grappling with a financial crisis at a time when the bifurcated State of Andhra Pradesh has high expectations from him. A year after its formation, problems seem to be aplenty for the State which was born with huge fiscal and revenue deficits — Rs. 20,320 crore and Rs. 14,252 crore, respectively.

The people of Andhra Pradesh had pinned their hopes on the government to deliver on a host of promises made before the elections, but the gaping deficits presented in this year’s budget present a grim picture. However, things have improved a little, as Finance Minister Yanamala Ramakrishnudu has managed to bring down the fiscal deficit to Rs. 17,584 crore and the revenue deficit to Rs. 7,300 crore. With the State not specifying how it will generate resources to meet budgetary requirements, the high deficit makes it an uphill task for the government.

Needs Central aid

One major impediment in the State’s planning process seems to be the Central government’s failure to deliver on its assurances to bridge the resource gap in the first year after bifurcation. Former Prime Minister Manmohan Singh had said on the floor of the House during the debate on the Andhra Pradesh Reorganisation Bill in Parliament: “The resource gap that may arise in the successor State of Andhra Pradesh in the very first year, especially during the period between the appointed day and the acceptance of the 14th Finance Commission recommendations, will be compensated in the regular Union Budget 2014-15.” But no step has been initiated by the succeeding National Democratic Alliance government in this direction so far , making it difficult for the new State to beat its huge resource crunch.

That apart, it has been a tightrope walk for the government on the waiver of loans promised to farmers and women self-help groups. The government has taken steps to deposit, in part, the payment of the loan waiver package to farmers, and is in the process of depositing the first instalment of the Rs. 10,000 waiver promised to each woman member of SHGs. But the inordinate delay and the cumbersome process of identifying beneficiaries, which allegedly ended up excluding a sizeable lot, is drawing criticism from many parts of the State.

There is still a long way to go before the government fulfils its promises and this hinges on the Central government’s commitment to handhold the State to overcome its financial woes.

A major expenditure is, of course, the new capital. According to analysts, there are wide-ranging apprehensions that the government may resort to imposing new fees in the form of user charges and other levies if the deficit continues to widen this year too. “It is not at all a rosy picture for the State which is largely dependent on Central assistance to meet its requirements,” said one analyst. This has had an effect on the State’s planning process. With Andhra Pradesh losing out on Hyderabad as a result of the bifurcation, investors are reportedly not willing to venture into a new State, especially one that has no ready capital yet. They are on wait-and-watch mode, at least for the first year.

The delay in announcement of an industrial policy and the eternal wait for special category status has created another challenging scenario, say top bureaucrats. “Andhra Pradesh’s hands are tied when it comes to industrial policy. It is linked to the special category status, as that brings in several tax sops and a congenial ecosystem for industrial growth,” said a senior government official.

This can be seen from the fact that there have been no concrete proposals for Andhra Pradesh, except for a couple of announcements relating to Visakhapatnam, the port city, which already has the necessary infrastructure to house industries, both big and small. Hyderabad continues to attract big ticket investors like Google, which has announced aggressive expansion plans for its unit in the city.

The State government’s salary hike of 43 per cent and 27 per cent interim relief for its employees, to meet the cash-rich Telangana standards, is going to cost the exchequer a steep Rs. 9,284.5 crore.

Time to leave Hyderabad

The absence of infrastructure and capital in the new State and the excessive reliance on Hyderabad, which is to be joint capital for 10 years, has put the A.P. government at loggerheads with its Telangana counterpart on several fronts. These include the sharing of offices of key departments in the joint capital. Adding to this are woes on the political front, with the Telangana Rashtra Samithi’s manoeuvres to project the Telugu Desam Party as a party from the ‘other’ State.

TRS has succeeded in attracting some key TDP leaders over to its fold in the past few months, forcing TDP president and Chief Minister Mr. Naidu to focus more on Telangana. This was evident from the amount of time he gave to Telangana leaders these past few weeks compared to previous years, when his Telangana leaders had to wait hours to meet their president.

The focus on Telangana is also giving rise to certain unsavoury incidents, the latest being the arrest of TDP MLA A. Revanth Reddy on charges of bribing a nominated MLA to vote in favour of the TDP in the Legislative Council elections on June 1. Coupled with these are reports of growing unrest among the people over the government’s failure to shift base to the new State. This is mounting pressure on the government to do something to assuage their feelings. Mr. Naidu has rightly announced his intentions to stay among the people, by residing in Vijayawada for at least part of the week.